Is it possible to discharge a student loan via bankruptcy? If this is something you’re about to go through in 2016, the following guide can provide some useful information and suggestions.
2016 Changes and Specifics
Declaring bankruptcy isn’t the best way to escape from student loans – with a few basic exceptions these are for life. This characteristic of student loans makes them quite different from other types of debt that can be generally discharged when bankruptcy is declared.
Some regulators are proposing changes to these rather rigorous regulations. Some information about the possible change was released in the summer of 2015. In the autumn, the Obama administration backed the suggestion.
The administration called to Congress with a request for changes in the rigid rules. The most important proposal made involves the possibility for private student loans to be wiped out in the case of bankruptcy. According to administrators, it’s illogical for student loans to be rigid when all other consumer types of borrowing can be discharged in the case of bankruptcy.
No decision has been taken about the proposal yet but many see it as a move in the right direction. If the issue is something that concerns you, keep an eye on the news to get information about the way in which Congress will handle the proposed changes.
Are Student Loans Dischargeable in Certain Situations?
The claim that student loans can’t be discharged via bankruptcy under any circumstances is a gross generalisation. There are some possibilities for the individuals struggling with significant debt to deal with the issue.
The Brunner test is one of the requirements for discharging a student loan via bankruptcy. The test consists of three main criteria that are used to determine whether paying back a student loan is going to cause you undue hardship. These criteria include:
- The income and the expenses you have don’t permit you to maintain a minimal standard of living.
- There are additional circumstances that will disable you from maintaining a minimal standard of living for a significant period of time and while you’re being forced to make student loan payments.
- You have done everything possible to make your student loan payments in a timely manner, yet you’re still struggling.
These are the circumstances under which it may become possible to discharge a student loan via bankruptcy in 2016. Since many people don’t believe that a student loan can be discharged like other commercial types of borrowing, they don’t even include this item in the bankruptcy proceedings.
If you pass the Brunner test, you will need to talk to a bankruptcy attorney. A lawyer can give you a much better idea about the loan discharge proceedings in the case of a bankruptcy and what the best option for handling the student loan is.
Are There Other Student Loan Discharge Options?
So, discharge via bankruptcy isn’t the best option and chances are that you’ll have to dedicate a lot of time and effort to making it happen. If so, are there any other possibilities for discharging the debt you’ve accumulated while attending college?
Sometimes, borrowers have argued that because a private loan hasn’t been used to attend a college that’s eligible for federal student aid programs, the loan can’t be considered an educational one. In such instances, the loan is considered simply a commercial type of borrowing. The more lenient loan discharge regulations will apply.
Looking for loan forgiveness options is also a good idea. Reconsider the whole notion of filing bankruptcy. If you have a consultation with an experienced professional, you may discover that debt repayment is possible without bankruptcy. You’ll simply have to explore the opportunities that make the monthly instalments smaller and easier to manage.
Income-based repayment plans are available for the individuals that have the lowest incomes. Loan forgiveness programs are also a great option for the individuals that work in public and non-governmental organisations.
Before you think about declaring bankruptcy, talk to an experienced attorney and explore your options. Chances are that bankruptcy isn’t going to have much of an impact on the student loans that you’ve taken. A much better possibility may be available, as long as you’re willing to look at alternatives.